Three of London's top hotels, including the world-famous Claridge's, have been plunged into the centre of Ireland's financial crisis after their owner lost a legal challenge against the state.

Belfast-born Paddy McKillen failed in his attempt to stop €2.1bn (£1.8bn) in loans associated with his property empire being acquired by Ireland's "bad bank", the National Asset Management Agency (Nama).

Three judges presiding at Dublin's high court dismissed his challenge on all five of the grounds he used for his case.

They ruled that his constitutional rights had not been breached, that Nama – set up in response to the country's banking and property crisis – had the "discretion" to acquire whatever loans it wished. Critically, EU legislation did not "limit the acquisition of bank assets to loans which are either impaired loans or are connected with impaired loans".

McKillen's central argument was that as all his loans were "fully performing", Nama was not entitled to acquire them.

The verdict means that the loans related to Claridge's and to the Berkeley and Connaught hotels will remain in Nama unless an appeal is heard or until the hotels are refinanced with non-Irish investors.

McKillen is in talks with the New York-based Northwood Investors, which could take a £200m stake with financing of about £400m provided by a syndicate of banks, led by Deutsche Bank. The hotel group hopes to conclude the deal by Christmas.

Northwood is headed by John Kukral, who originally had a stake in the hotel group through the private equity firm Blackstone. It is believed he did not want to sell to the Irish investors and is now keen to grab the opportunity to regain his stake in the prestigious business.

In a 47-page judgment, McKillen was told that Nama was "a proportionate response to the very grave financial situation" in which Ireland finds itself.

During the case, his barristers had told the court that his 67-property portfolio, which also includes the Forge shopping centre in Glasgow and the Waterfront in Belfast, was performing excellently. Michael Cush SC said that they were 96% let and generating €150m a year – or 1.7 times the amount needed to service the loans.

McKillen has argued that being in Nama would generate bad publicity for the hotels, and would deter potential customers from booking events such as weddings, as well as affecting the morale of the staff.